Consumer prices in U.S. rise more than forecast on gasoline

The cost of living in the U.S. rose in June by the most in four months as gasoline prices increased, a sign inflation is advancing toward the Federal Reserve’s goal.

The consumer-price index increased 0.5% after a 0.1% gain the prior month, Labor Department figures showed today in Washington. The median forecast in a Bloomberg survey called for a 0.3% rise. The biggest advance in gasoline prices (NYMEX:RBQ13) in four months accounted for about two-thirds of the gain the in the CPI. The core measure, which excludes food and fuel, rose 0.2%, matching the May gain and the survey median.

Some Fed policy makers, including St. Louis Fed President James Bullard, have expressed concern inflation is too low, raising the risk of an outright decline in prices that would sap the recovery. Price readings closer to the Fed’s goal will give the central bank the flexibility to move forward later this year with reductions in its monthly asset purchases designed to stoke the economy.

“This is probably going to be a little bit comforting for some of the folks at the Fed who are worried about lower inflation,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut, who correctly forecast the CPI. “Inflation’s still very subdued, still very well contained.”

Another report showed industrial production climbed in June by the most in four months, indicating manufacturing is improving heading into the second of half of the year. Output at factories, mines and utilities rose 0.3%, the Fed said.

Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in September rising less than 0.1% to at 1,677.7 at 9:27 a.m. in New York.

Economists’ Forecasts

The forecast for consumer prices was based on the median of 83 economists in a Bloomberg survey. Economists’ estimates ranged from no change to a gain of 0.6%.

The results included the biggest increase in clothing costs since August 2011 and higher prices for medical care, new cars and household furnishings.

Overall consumer prices increased 1.8% in the 12 months ended in June, more than projected and after a 1.4% year-over-year gain the prior month.

The core CPI rose 1.6% from June 2012, in line with projections and following a 1.7% advance in the prior 12 month period.